Hello. This is Huw Morgan from the Alliance Manchester Business School.
This is the eighth talk in a series of lectures on accounting records,
and this session introduces the Management of Working Capital,
the net assets that are available for use in the short term.
We start with a recap on the elements that comprise
working capital and then consider the importance of liquidity,
the ability of a business to meet
its obligations as they fall due, and operate on a day-to-day level.
We consider the potential impacts that
expansion may have on these short-term resources and
the importance of ratios to identify and resolve
potential problems before they get out of hand.
We shall continue this topic in the next session, session nine,
when we focus on valuation methods and the typical safeguards to minimise liquidity risk.
We first considered the importance of short-term finance in session 5
when reviewing Shaun's statement of financial position.
The next two sessions focus on the middle section of this statement,
the working capital of a business.
Working capital denotes those resources that are available for more immediate use,
normally considered to be convertible to cash within one year.